Real options valuation of franchise territorial exclusivity
With the maturity of the franchise system, franchisors have to look for new markets to capitalize constantly. This continuing expansion comes at the expense of the existing franchise establishments, as it could lead to territorial encroachment. One possible solution to mitigate this problem is by of...
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| Format: | Article |
| Language: | English |
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Taylor & Francis Group
2017-01-01
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| Series: | Cogent Business & Management |
| Subjects: | |
| Online Access: | http://dx.doi.org/10.1080/23311975.2016.1262490 |
| _version_ | 1818852791559389184 |
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| author | Lukito Adi Nugroho |
| author_facet | Lukito Adi Nugroho |
| author_sort | Lukito Adi Nugroho |
| collection | DOAJ |
| description | With the maturity of the franchise system, franchisors have to look for new markets to capitalize constantly. This continuing expansion comes at the expense of the existing franchise establishments, as it could lead to territorial encroachment. One possible solution to mitigate this problem is by offering territorial exclusivity rights (TER) of new potential location to the existing franchisee. Yet, pricing the value of TER is not simple due to contingent claim nature of this rights. Hence, the goal of this paper is to model the TER using real options approach, a financial options valuation method that applies in real business. The real options will be built using Datar–Mathews method and then simulated using hypothetical case data. Results and implications are also discussed. |
| first_indexed | 2024-12-19T07:26:32Z |
| format | Article |
| id | doaj.art-6096b890e75e450da47e80933ea77ecd |
| institution | Directory Open Access Journal |
| issn | 2331-1975 |
| language | English |
| last_indexed | 2024-12-19T07:26:32Z |
| publishDate | 2017-01-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Business & Management |
| spelling | doaj.art-6096b890e75e450da47e80933ea77ecd2022-12-21T20:30:48ZengTaylor & Francis GroupCogent Business & Management2331-19752017-01-014110.1080/23311975.2016.12624901262490Real options valuation of franchise territorial exclusivityLukito Adi Nugroho0Meiji UniversityWith the maturity of the franchise system, franchisors have to look for new markets to capitalize constantly. This continuing expansion comes at the expense of the existing franchise establishments, as it could lead to territorial encroachment. One possible solution to mitigate this problem is by offering territorial exclusivity rights (TER) of new potential location to the existing franchisee. Yet, pricing the value of TER is not simple due to contingent claim nature of this rights. Hence, the goal of this paper is to model the TER using real options approach, a financial options valuation method that applies in real business. The real options will be built using Datar–Mathews method and then simulated using hypothetical case data. Results and implications are also discussed.http://dx.doi.org/10.1080/23311975.2016.1262490franchisereal optionsterritorial encroachmentterritorial exclusivitydatar–matthews |
| spellingShingle | Lukito Adi Nugroho Real options valuation of franchise territorial exclusivity Cogent Business & Management franchise real options territorial encroachment territorial exclusivity datar–matthews |
| title | Real options valuation of franchise territorial exclusivity |
| title_full | Real options valuation of franchise territorial exclusivity |
| title_fullStr | Real options valuation of franchise territorial exclusivity |
| title_full_unstemmed | Real options valuation of franchise territorial exclusivity |
| title_short | Real options valuation of franchise territorial exclusivity |
| title_sort | real options valuation of franchise territorial exclusivity |
| topic | franchise real options territorial encroachment territorial exclusivity datar–matthews |
| url | http://dx.doi.org/10.1080/23311975.2016.1262490 |
| work_keys_str_mv | AT lukitoadinugroho realoptionsvaluationoffranchiseterritorialexclusivity |